You're right in that white seems to have a good game. But in reality, not much more than that. Black continues with 4. ...d6, and can go into many variations such as the optimistic, but shaky Four Pawns Attack with 5.f4, Exchange variation with 5.dxe6, where black can respond by taking with either pawn, and will usually follow up with a kingside fiancetto if he takes back with the c-pawn. Of course, there are other variations such as the Balogh, Two pawns attack, Two Knights variation, Scandinavian variation, Modern variation (perhaps the most challenging), etc. Look them up if you wish. Black's basic idea is to get white to over-extend his center, creating targets in the form of pawns and the weaknesses left in the pawns' wake, and then undermine those weaknesses with pieces. Again, white seems to have a good game because of the classic space advantage in the centre. BUT, that's black's plan - The Alekhine Defence is a hypermodern idea, so black voluntarily gives up the centre in the opening, just to challenge it later on from the sides.
According to chessgames.com, the Alekhine's Defence has a win rate of 33.4% for black, which is very, very respectable; especially when compared to other very highly respected openings such as the Caro Kann, French, Najdorf etc.
I don't know if Alekhine himself won tournaments using just this defence, but here are a few games where he successfully employed it against strong opponents: Bogoljubov, Maroczy, Mieses, and a lesser known, but still strong Sergeant. The last game is a famous positional crush featured in a book I have on the Alekhine Defence.
Besides Alekhine, many world champions have employed it throughout history, such as Capablanca, Euwe, Tal, Bronstein, Fischer (remember the famous Spassky vs.Fischer 1972 game?), Smyslov, Petrosian, Spassky, etc. Even Carlsen has employed it now and then as a surprise weapon. Check out Carlsen vs. Topalov.
To conclude, I don't think its possible for anyone to answer why Alekhine introduced this defence (if he did), and what merits he saw. However, he must have certainly judged it to be a playable opening that matched his style (aggressive). But as I've outlined, it has become a formidable surprise weapon over time, and is even used nowadays at the very top level in major tournaments.